Drb-hicom

*DRB-HICOM (DRB MK, BUY, TP: MYR2.77)*
A New Dawn
Company Update
DRB-HICOM’s (DRB) binding heads of agreement with Zhejiang Geely (Geely) in respect of the sale of a 49.9% stake in Proton, marks a new beginning for the beleaguered national auto maker. Geely would pursue its expansion into ASEAN markets through Proton, which would be able to leverage on Geely’s advanced technology, business network and global best practices. DRB would be able to separately monetise non-core assets extricated from Proton including land, businesses and concurrent sale of Lotus. DRB expects to conclude the definitive agreement by July. After factoring in the additional value of extricated assets and the Government’s partial reimbursement of R&D costs in our SOP estimate (including 10% holding company discount), we raise our TP to MYR2.77 (from MYR1.83, 65% upside). Upgrade to BUY (from Trading Buy).

CIMB pick

CIMB 2017 top small cap pick: DRB-Hicom, Bonia Corp, Sasbadi and Karex.
CIMB 2017 小资本股推荐：DRB-Hicom, Bonia Corp, Sasbadi and Karex。

DRB-HICOM

DRB-HICOM (DRB MK, TRADING BUY, TP: MYR1.71)
Who Will The OEM Partner Be?
Results Review
After cuts to our earnings and changes for its equity stake in Pos Malaysia and Corwin Holdings, our SOTP-derived TP falls to MYR1.71 (from MYR2.00, 74% upside). A significant re-rating catalyst – in the form of the potential OEM partnership (results to be announced in 1H17) – is pinned on expectations for the partner to provide equity injection into Proton and thus reduce DRB-Hicom’s stake of Proton losses in the near term. We expect news flow to remain positive in the coming months, coupled with a steady stream of bookings for its newly launched models. While the longer-term outlook remains uncertain, its share price may exceed 15% for the next 3 months. We change our recommendation to TRADING BUY (from BUY).

Stock Pick - RHB

Fundamental report from RHB Research

11/4/16

1. Drbhcom (current price 1.09, TP 1.30)
- Maintain Buy
- the availability of new models and the injection of funding would help to tide Proton over in the near term.
- its key milestones would be the identification of a new foreign strategic partner and a solution to raise utilization rates

2. Fgv (current price 1.50, TP 1.41)
- Maintain Neutral
- FGV has called off the Zhong Ling Nutril Oils acquisition citing that it was unable to fulfil the conditions set out in the S&P agreement within the stipulated time.

DRB-HICOM -Ending the downtrend process?

Monitor closely.